Masthaven’s new director of intermediaries, Rob Barnard, has seen a huge change in the buy-to-let arena since tax changes took effect, at a time when London house prices have remained high.
He says: “We have seen a reduction in the number of purchase transactions, and a move towards more remortgage business. With purchases we have seen a change from those applying with their personal names to those applying with limited company names.”
A large part of this is due to the change in tax treatment on buy-to-let properties, and the fact that income tax relief on interest payments is being phased out, something of particular concern if the landlord is a higher rate taxpayer.
In addition, the yields on many properties in the southeast have reduced dramatically, as house prices remain high. This has prompted many landlords to look further north, where property prices are lower.
Mr Barnard says: “Yields in London are significantly lower than in northern parts of the country – Manchester, Liverpool, Nottingham and Hull – because property in London is so expensive, but in the north you can still buy relatively modestly.”
Lending
Buy-to-let is a big part of the mortgages that Masthaven provides – making up 50 per cent of all its lending.
It is an intermediary-only lender, starting out as a second-charge and bridging lender, and then receiving its banking licence three years ago, so it could get into savings and lending.
It also does first-charge lending on residential purchases. But second-charge lending still exists, and there is still space for it, says Mr Barnard. “Second-charge has changed over the past few years. There are many times when you would pick a second-charge over a remortgage,” he says.
“If, for example, you have recently taken out a five-year repayment mortgage, and six months later you need to take some money out, why would you consider a remortgage when you get an early repayment charge and when you can get a second-charge with rates are as low as they have ever been?
“Why not borrow additional money?”
Mr Barnard started out in financial services working for the Cheshire Building Society. He says: “In Macclesfield, if you didn’t go to university you either went to work for ICI or the Cheshire Building Society. I worked my way up from general clerk to managing a number of branches.”
He then joined Verso, which was the forerunner of Platform.
Helping those turned away
He says: “I’ve never sold a rate, I’ve sold a solution.”
Masthaven, he says, tries to find solutions for people who have been turned away from the High Street, usually because the credit score turned them down. This could be because they may have been slightly late with a credit card payment, and there is a “blip” on their credit score.
“Does that mean they should get turned down for a mortgage?” he asks.
“We do lend to people with blips on their credit file, but we have to be careful about [the label] ‘sub-prime’.
“There is an increase in credit issues, but the average size of a county court judgment has come down significantly. It was £3,800; it’s now £1,400. People are taking action earlier.”
‘Unusual’ clients
Masthaven does not use a conventional credit score, but does look at credit history, such as repayments, time in employment and how many times a person might have moved house.
Also it might look more closely at an individual’s circumstances; if they are a bit unusual, the High Street automatically turns that person away, simply because they do not fit the mould.
For example, the self-employed often find it difficult to get a mortgage, and many lenders ask for three years’ accounts.
Masthaven asks for 18 months, and might take certain things into account. For example, an entrepreneur may be making a lot of profit, and ploughing that back into the business, instead of paying him or herself a dividend.
The High Street may simply see that as the businessperson not making much money, whereas Masthaven will look more closely at the accounts, says Mr Barnard.
Another big impact on the housing market is the greater need for affordability checks when people take out a loan, following the Financial Conduct Authority’s Mortgage Market Review.
Partly as a consequence of this, people are now taking out much longer mortgages.
He says: “When you took your first mortgage out, it was 25 years and there was no choice. Now mortgagae terms are 35 or 40 years, people are taking loans for longer to make affordability fit.”
Mr Barnard sees himself as a salesman primarily, and one of the ways he engages people at the outset is his quirky hobbies.
He grows giant vegetables and enters shows for his giant flowers and carrots. He is show secretary at the local flower show, and has won awards.
For his clients it is a way to make him seem more human and understanding of unconventional people trying to get a mortgage.
Melanie Tringham is features editor of Financial Adviser and FTAdviser
